1 first international conference on higher education and economic regeneration. cape town, 2002...

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FIRST INTERNATIONAL CONFERENCE ON HIGHER EDUCATION AND ECONOMIC

REGENERATION. Cape Town, 2002

CO-OPERATIVE FIRMS: CO-OPERATIVE FIRMS:

AN APPROPRIATE WAY OF AN APPROPRIATE WAY OF ENCOURAGING ENTREPRENEURIAL ENCOURAGING ENTREPRENEURIAL SPIRIT IN DEVELOPING COUNTRIESSPIRIT IN DEVELOPING COUNTRIES

Alfonso VARGAS SÁNCHEZ

(Head of Management and Marketing Department.

University of Huelva, Spain)

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ENTREPRENEURSHIP FOUNDATIONS

Education

and

Training

Creation of a fostering

environment for setting up

new businesses

Higher Education

(University)Social Economy

(Co-ops)

ECONOMIC REGENERATION

Developing countries and economies in transition to a capitalist system

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THE ROLE OF EDUCATION

Global Entrepreneurship Monitor (GEM).Global Entrepreneurship Monitor (GEM). General conclusions: General conclusions:

In the long term, the maintenance of the entrepreneurial activity In the long term, the maintenance of the entrepreneurial activity needs a substantial commitment of investment in education to needs a substantial commitment of investment in education to post-graduate levels.post-graduate levels.

The development of the skills and aptitudes demanded to initiate The development of the skills and aptitudes demanded to initiate a business must form a specific part of the whole educational a business must form a specific part of the whole educational and professional formation, at all levels.and professional formation, at all levels.

Without taking into account the level of education, emphasis Without taking into account the level of education, emphasis should be put on developing the individual aptitude to recognize should be put on developing the individual aptitude to recognize and to take advantage of opportunities.and to take advantage of opportunities.

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Global Entrepreneurship Monitor (GEM).Global Entrepreneurship Monitor (GEM). 2001 Report.2001 Report.South Africa:South Africa:

In the past, the education system was one of the key issues In the past, the education system was one of the key issues which hindered entrepreneurship, actively discouraging which hindered entrepreneurship, actively discouraging creativity and independence, and damaging self-esteem.creativity and independence, and damaging self-esteem.

The general basic education is poor for a large proportion The general basic education is poor for a large proportion of the population. A lack of basic literacy and numeracy, of the population. A lack of basic literacy and numeracy, as well as more technical skills, continue to exert a serious as well as more technical skills, continue to exert a serious constraint.constraint.

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Global Entrepreneurship Monitor (GEM).Global Entrepreneurship Monitor (GEM). 2001 Report. 2001 Report.South Africa. Policy implications:South Africa. Policy implications:

The primary challenge is to expand the pool of potential The primary challenge is to expand the pool of potential entrepreneurs. The key policy lever for achieving this long-term entrepreneurs. The key policy lever for achieving this long-term project is education.project is education.

Primary and secondary education lay the basis for an entrepreneurial Primary and secondary education lay the basis for an entrepreneurial society, both in terms of basic skills and entrepreneurial mindset. In society, both in terms of basic skills and entrepreneurial mindset. In fact, the new school curriculum has a strong focus on entrepreneurship fact, the new school curriculum has a strong focus on entrepreneurship and management skills.and management skills.

Tertiary education can provide valuable additional entrepreneurial Tertiary education can provide valuable additional entrepreneurial capacity. Bear in mind that survival rates among start-ups are roughly capacity. Bear in mind that survival rates among start-ups are roughly double for tertiary-educated metropolitan entrepreneursdouble for tertiary-educated metropolitan entrepreneurs;; also, tertiary also, tertiary education increases the likelihood that someone will perceive good education increases the likelihood that someone will perceive good opportunities for starting a business.opportunities for starting a business.

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Global Entrepreneurship Monitor (GEM).Global Entrepreneurship Monitor (GEM). 2001 Report.2001 Report.Spain:Spain:

It was not until the late 1990s that an entrepreneurial culture It was not until the late 1990s that an entrepreneurial culture really began to take root, especially among young adults. really began to take root, especially among young adults. However, there is still a high level of aversion to risk, and there However, there is still a high level of aversion to risk, and there is still little acceptance of entrepreneurial success.is still little acceptance of entrepreneurial success.

As a consequence, traditionally, university education has not As a consequence, traditionally, university education has not been focused on entrepreneurship.been focused on entrepreneurship.

But...But...

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This is changing in Spain. For instance: This is changing in Spain. For instance:

SSubjects ubjects aboutabout entrepreneurship are increasingly more frequent entrepreneurship are increasingly more frequent in the in the universities’ universities’ study plans.study plans.

Subjects about social economy firms, especially co-ops, are Subjects about social economy firms, especially co-ops, are becoming more and more frequent as well, promoting among becoming more and more frequent as well, promoting among students the setting up of these types of companies.students the setting up of these types of companies.

Some universities have started business incubators.Some universities have started business incubators.

In many universities students run a “junior enterprise”, as part In many universities students run a “junior enterprise”, as part of a pan-European network.of a pan-European network.

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THE ROLE OF SOCIAL ECONOMY

Why co-ops? Why co-ops?

1.-Democratic organizations. The most essential feature 1.-Democratic organizations. The most essential feature of co-operatives is its democratic member control. of co-operatives is its democratic member control. Therefore, the participation in these types of Therefore, the participation in these types of organizations is converted, not only into an organizations is converted, not only into an entrepreneurs' school, but into a democrats' school, entrepreneurs' school, but into a democrats' school, because there the democracy is put into practice. They because there the democracy is put into practice. They are one more element of learning to consolidate the are one more element of learning to consolidate the democratic values in a society, specially in young democratic values in a society, specially in young democracies and in those still in transition.democracies and in those still in transition.

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2.-A useful tool. 2.-A useful tool. They are alternative companies to the They are alternative companies to the conventional capitalist conventional capitalist ones, ones, which have arisen to give a which have arisen to give a more social response to more social response to employment employment creation, creation, with with bigger bigger member member participationparticipation, , anand to fosterd to foster economic and economic and social development of local and regional areas. social development of local and regional areas. They are They are very flexible companies, they contributevery flexible companies, they contribute to the formation to the formation of a managerial spiritof a managerial spirit, and , by their own principles, they , and , by their own principles, they must investmust invest in the in the education and training education and training of their human of their human capital and capital and taketake decisions decisions in a in a participativparticipative mannere manner. .

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3.-A universal phenomenon. 3.-A universal phenomenon. The United Nations The United Nations estimated in 1994 that the livelihood of nearly 3 billion estimated in 1994 that the livelihood of nearly 3 billion people, or half the world's population, was made secure people, or half the world's population, was made secure by co-operative enterprises. More than 800 million by co-operative enterprises. More than 800 million individuals are members of co-operatives, which provide individuals are members of co-operatives, which provide an estimated 100 million jobs. In a number of countries an estimated 100 million jobs. In a number of countries in Africa, the cooperative movement has become the in Africa, the cooperative movement has become the second largest employer, surpassed only by the State. In second largest employer, surpassed only by the State. In this region, the majority of jobs have been created this region, the majority of jobs have been created through the activities of agricultural cooperativesthrough the activities of agricultural cooperatives ((production, marketing, and processingproduction, marketing, and processing)). .

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4.-An outstanding phenomenon. 4.-An outstanding phenomenon. Examples of the Examples of the economic significance of cooperatives economic significance of cooperatives in developing in developing countries countries can be seen by the market shares they hold. In can be seen by the market shares they hold. In Burkina Faso, agricultural cooperatives are the largest Burkina Faso, agricultural cooperatives are the largest producers of fruit and vegetables for the national marketproducers of fruit and vegetables for the national market,, and in Ivory Coast they are responsible for 77% of the and in Ivory Coast they are responsible for 77% of the cotton productioncotton production. . In Uruguay, cooperatives process 90% In Uruguay, cooperatives process 90% of the national milk production and export 70% of the of the national milk production and export 70% of the surplus wheat production. In 1997, the contribution of surplus wheat production. In 1997, the contribution of cooperatives to Gross Domestic Product (GDP) in the cooperatives to Gross Domestic Product (GDP) in the Philippines was 16%.Philippines was 16%. In In South South Korea 40% of local Korea 40% of local agriculture was marketed through cooperativesagriculture was marketed through cooperatives......

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Co-ops. Potential weaknesses.Co-ops. Potential weaknesses.

Enough evidence exists to indicate the following Enough evidence exists to indicate the following as principal reasons for the failures of these as principal reasons for the failures of these companies: companies:

Lack of member commitment. Lack of member commitment. No professional management. No professional management. Misinterpretation of some co-operative Misinterpretation of some co-operative

principles, or even non application of some of principles, or even non application of some of them.them.

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Co-ops. Potential strengths:Co-ops. Potential strengths:

They are firms of participation.They are firms of participation. The double (or triple) role of member/supplier The double (or triple) role of member/supplier

and/or member/consumer.and/or member/consumer. The orientation to the person and the values of The orientation to the person and the values of

cooperativism.cooperativism. The democratic condition of their leaders.The democratic condition of their leaders. The balance among stakeholders’ interests The balance among stakeholders’ interests

(members, suppliers, customers, society).(members, suppliers, customers, society).

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How does a co-operative basically differ from aHow does a co-operative basically differ from a conventional capitalist enterprise?conventional capitalist enterprise?

Unlike a conventional capitalist enterprise, in a co-operative Unlike a conventional capitalist enterprise, in a co-operative the member participates in all the ebbs and flows of the member participates in all the ebbs and flows of his/her organisation: his/her organisation: physical (supplying the products physical (supplying the products and consuming inputs), financial (bringing capital and and consuming inputs), financial (bringing capital and receiving his/her part of the results) and information-receiving his/her part of the results) and information-decision (taking part in the business side). This is why a decision (taking part in the business side). This is why a co-operative society can be defined as an enterprise of co-operative society can be defined as an enterprise of participation. The following picture might compare the participation. The following picture might compare the rules that apply in both types of companies. rules that apply in both types of companies.

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PARTICIPATIONPARTICIPATION CONVENTIONAL CAPITALIST CONVENTIONAL CAPITALIST SOCIETYSOCIETY

COOPERATIVE COOPERATIVE

SOCIETYSOCIETY

IN CAPITALIN CAPITAL Not connected with the Not connected with the company’s production-company’s production-

distribution process. The distribution process. The status of member is acquired status of member is acquired by participating in the capital.by participating in the capital.

Connected with the Connected with the company’s production-company’s production-

distribution process. The distribution process. The status of member is status of member is

acquired by participating acquired by participating in this process.in this process.

IN PROFITSIN PROFITS Based on the capital brought Based on the capital brought to the company.to the company.

Based on the activity Based on the activity carried out in the carried out in the

company.company.

IN MANAGEMENTIN MANAGEMENT Based on the capital brought Based on the capital brought to the company (one share, to the company (one share,

one vote).one vote).

Democracy Democracy

(one member, one vote).(one member, one vote).

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The role of cooperativism in South Africa is weak.The role of cooperativism in South Africa is weak.

NCASA (NCASA (National Co-operative Association of National Co-operative Association of South AfricaSouth Africa): 600 co-ops; 30,000 membres.): 600 co-ops; 30,000 membres.

SACCOL (Savings and Credit Cooperative SACCOL (Savings and Credit Cooperative League of South Africa): 28 Credit Unions; League of South Africa): 28 Credit Unions; 12,252 members; 0.07% of penetration rate 12,252 members; 0.07% of penetration rate (according to the World Council of Credit (according to the World Council of Credit Unions,WOCCU, 2001 Statistical Report).Unions,WOCCU, 2001 Statistical Report).

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MEMBERS

-Need.

-Commitment.

-Autonomy and independence.

-Credibility of/Trust in Board of Directors.

PROFESSIONAL MANAGEMENT

-Tuning with the idiosyncrasy of cooperative formula.

Management based on:

-Quality.

-Training and Education.

-Planification.

MANAGER-MEMBERS RELATIONSHIP

-Social discipline (rules agreed by consensus procedure).

-Personal contact, closeness to members.

-Information, transparency.

-Mutual communication and trust.

SUCCESS KEYS

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FINAL CONCLUSIONS

Although the market has proved to be the most powerful Although the market has proved to be the most powerful wealth generating mechanism, it leads to great inequalities wealth generating mechanism, it leads to great inequalities in wealth distribution that sow the seeds for social conflict in wealth distribution that sow the seeds for social conflict if they are not mitigated or rectified.if they are not mitigated or rectified.

An area of social and economical needs, which is An area of social and economical needs, which is becoming broader and broader, is met neither by becoming broader and broader, is met neither by governmental action nor by conventional capitalist governmental action nor by conventional capitalist enterprises.enterprises.

This is causing a proliferation of substitute organizations, This is causing a proliferation of substitute organizations, such as Non-Govermental Organizations, Non-Profit such as Non-Govermental Organizations, Non-Profit Organizations, etc., in general Social Economy Organizations, etc., in general Social Economy organizations, including co-ops. organizations, including co-ops.

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FINAL CONCLUSIONS

There are manyThere are many examples of co-operative success examples of co-operative success, , such as such as Rural Development Co-operatives Rural Development Co-operatives in in Benin, Benin, Dairy Co-operativeDairy Co-operatives in India, s in India, Agricultural Agricultural Co-operatives Co-operatives in South Korea, in South Korea, Savings and Credit Savings and Credit Co-operatives Co-operatives in in Sri-Lanka Sri-Lanka or or Utility Co-Utility Co-operatives operatives in in South AmericaSouth America..

All social economy firms, co-ops and others, have All social economy firms, co-ops and others, have to be viable businesses; this is the only way to to be viable businesses; this is the only way to achieve their social purposes, taking into account achieve their social purposes, taking into account that:that:

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FINAL CONCLUSIONS

Their aim is more to provide services to their Their aim is more to provide services to their members and the community than to achieve members and the community than to achieve profits.profits.

Their decision-making process is democratic.Their decision-making process is democratic. Their distribution of profits or surpluses gives Their distribution of profits or surpluses gives

priority to persons (members) rather than capital.priority to persons (members) rather than capital. Their management is autonomous with respect to Their management is autonomous with respect to

both the public sector and the profit-making both the public sector and the profit-making private sector.private sector.

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Departamento de Dirección de Empresas y

MarketingManagement and Marketing Department. University of Huelva, SpainManagement and Marketing Department. University of Huelva, Spain